Question

In a reorder point problem where both demand and lead time are variable, demand averages 200 units per day with a daily variance of 64, and lead time averages 6 days with a standard deviation of 1 day. What should the reorder point be for a 95% service level?

Answer 1

Answer:

~ 1561.235

Explanation:

Given :

$Z=1.645$

$d = 200\ \\variance =64$

Standard deviation can be determined by the $\sqrt{variance }$

Standard deviation=SD

=$\sqrt{64}\ =\ 8$

$LT = 6$

σ = 8

Now using the formula

$R\ =\ d \ *\ LT\ +Z\ \sqrt{LT^{2}\ +SD^{2} \ +\ d\ \sigma\ ^{2} } \\\\Putting\ the\ respective\ value\ we\ get \\R=200 * 6 + 1.645\sqrt{6 * 8^2 + 200 *1^2}$

R=1561.235

~ 1561.235